Royal Mail bankers reject claims sale price was too low

Wed Nov 20, 2013 1:01pm EST
 
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By Neil Maidment and Kylie MacLellan

LONDON (Reuters) - Goldman Sachs (GS.N: Quote) and UBS UBSN.VX bankers said Britain could not have sold the Royal Mail (RMG.L: Quote) postal service at its current higher price, rejecting accusations that one of the biggest privatizations in years had short-changed taxpayers.

The two banks, which led Royal Mail's London stock market listing, were summoned before a parliamentary committee on Wednesday to explain why they had priced the near 500-year old firm so far below its current market value.

Royal Mail's shares have rocketed by as much as 80 percent since Britain sold a 60 percent stake in October for 330 pence ($5.30) per share, sparking criticism from unions and opposition lawmakers that the banks set the sale price too low.

The spotlight on the sell-off, one of the most significant since John Major's Conservative party sold the railways in the 1990s, comes as the government is aiming to offload shares in Lloyds Banking Group (LLOY.L: Quote) and rival RBS (RBS.L: Quote).

Adrian Bailey, chairman of the Business Innovation and Skills committee and a member of the opposition Labour party, criticized the Royal Mail sale price.

"It is possible that the government has lost over 1 billion pounds worth of revenue for taxpayers at a time of great austerity," he told Reuters after the hearing.

Richard Cormack, co-head of equity capital markets at Goldman Sachs said feedback from potential investors on what they were prepared to pay and the large stake on offer were among factors that had determined the price.

UBS banker James Robertson agreed. "The current price is not reflective of what we could have sold 600 million shares for," Robertson told the committee. Varying views of risks facing Royal Mail, such as its lack of proven profitability, led to differing valuations by a number of banks, he said.   Continued...

 
Ben Story, head of UK investment banking & broking at Citibank leaves Portcullis House, in central London November 20, 2013. REUTERS/Luke MacGregor